FTC Reaches Settlement With Home Security Company that Called Millions of Consumers on the National Do Not Call Registry

As posted on March 12, 2014 on www.ftc.gov

The Federal Trade Commission, with the assistance of the U.S. Department of Justice, has settled a complaint against a Massachusetts-based home security company that illegally called millions of consumers on the FTC’s National Do Not Call (DNC) Registry to pitch home security systems.

The sales leads were obtained by illegal means through rampant use of robocalls from “Tom with Home Protection,” fake survey calls, and calls to phone numbers on the National Do Not Call Registry. According to the complaint, VMS subsequently called these consumers without first checking to see if they had registered their telephone numbers on the DNC Registry.

In addition, the complaint alleges that VMS ignored warning signs that the lead generators were engaged in illegal telemarketing practices. For example, many consumers contacted by VMS complained that they had not given the company permission to call, nor had they given permission to receive a robocall. Despite mounting complaints, VMS continued buying leads from the same lead generators, and calling consumers using those leads.

“Companies that use lead generators must exercise due diligence when they buy lists of phone numbers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, “or else they can be on the hook for illegal telemarketing. Relying on a say-so that the numbers were obtained legally, or that the consumers have agreed to be called, even if their numbers are on the Do Not Call Registry, isn’t enough.”

According to the complaint, between November 2011 and July 2012, VMS made more than two million calls to consumers to try to sell home security goods and services. Of those calls, at least one million were to phone numbers listed on the DNC Registry, and more than 100,000 were to consumers who had previously told VMS not to call them again – another violation of the DNC rules.

The stipulated final court order settling the charges prohibits VMS and Gotra from making abusive telemarketing calls and from calling any consumer whose number is on the DNC Registry, unless they can prove that they have received written permission to make the call or that they have an established business relationship with that consumer. Further, it bars defendants from calling any consumer who has previously told VMS not to call them again. The order also places restrictions on how defendants can obtain and use lead-generated phone numbers in the future.

Finally, the order imposes a $3.4 million penalty judgment against the defendants, with all but $320,700 suspended due to their inability to pay. The entire amount will become due if the defendants are found to have misrepresented their financial condition.

The court settlement announced today resolves the FTC’s complaint against Versatile Marketing Solutions, Inc. also doing business as VMS Alarms, VMS, Alliance Security, and Alliance Home Protection; and its owner, Jasjit Gotra.

The Commission vote authorizing the staff to refer the civil penalty complaint to the Department of Justice, and to approve the proposed consent decree, was 4-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the District of Massachusetts on March 10, 2014. The proposed consent decree is subject to court approval.